The word insurance often frightens people, because it immediately implies the incurrence of damage or loss. This initial fright is then followed by the annoying realization that the situation will probably involve complicated insurance procedures before compensation is received. Insurance claims are often difficult because the average person is ignorant when it comes to the forms of settlement commonly offered as compensation. By simply understanding the difference between a lump sum payment and a structured insurance settlement you place yourself in a more comfortable position to deal with consequences of suffering damages.
When a person suffers loss (the plaintiff) which is caused by another party then he or she is entitled to compensation for this loss. The party that caused the harm (the defendant) will then have to pay an amount of money which is deemed sufficient to compensate the plaintiff for the wrongdoing. The two forms of compensation payable to the plaintiff are either a lump sum or a structured settlement.
Lump sum: this form of settlement requires the defendant to pay the entire amount in a lump sum. Plaintiffs often find it difficult to receive payment when a lump sum agreement has been reached because of the large amount of money involved in many damage claims.
Structured settlement: in an effort to lessen the shock of having to pay the full amount in a single lump sum, legislators have developed the structured settlement form of payment. The defendant will then be expected to pay the amount in installments which are calculated to cover the loss over a set period of time. The full amount will eventually be paid, but the defendant is given the leniency of paying smaller amounts instead of a burdensome lump sum.
What are structured insurance settlements?
The sheer extent of claims for damages has resulted in a burgeoning insurance industry. An insurance company offers to take the risk on behalf of the defendant and will therefore cover the cost of losses in the event of damages.
By taking the place of the defendant, the insurance agency is in a position to exercise the same options as an ordinary defendant. The insurance agency can thereby reach an agreement which allows for the payment of a lump sum or a structured insurance settlement. When an insurance agency pays compensation in installments it is called a structured insurance settlement.
Benefits of structured insurance settlement
Having the amount paid off on the basis of monthly installments is much more secure, because it is very uncommon for an insurance agency to default on a payment. It is also beneficial because it ensures a steady inflow of money on a monthly basis. This money can either be saved or used for usual expenses. Structured insurance settlements are such a reliable source of payment that third parties are often willing to purchase them at very competitive rates.
Is a structured insurance settlement the way to go?
Structured insurance settlements are a reliable payment option when seeking compensation for the damages that you have suffered. This form of payment minimizes the need for additional legal battles because defaults are rare. The added benefit of being able to sell the settlement onto a third party means that you will always be able to access a large sum of cash, if this is what you require.